(By Izabella Kaminska at FT Alphaville)

Olivier Jakob at Petromatrix continues his crusade against the United States Oil Fund in his Tuesday note, an issue increasingly being picked up across the commodities and investment spectrum.

Jakob’s specific case is with the distortions being caused in the WTI market on account of the ETF’s size and predictability. He notes people are already rolling positions from the front-month April contract and into May just to avoid the distortions. This is making the front-month contract somewhat of a farce, with a number of oil traders telling FT Alphaville the contract’s viability as a hedging instrument is truly in question.  The volatility, meanwhile, is also immense relative to any other contracts further down the curve.

Full post here.

Some contrarian predictions from LCM Commodities analyst Ed Morse, via The National: demand growth will return, but it will be lower than the 1.5 to 1.8% seen in1991 – 2007. His reasoning:

Part of the economist’s argument is based on his observation that every previous oil price spike in the past 60 years has been followed by a lower rate of demand growth. Global demand was growing at 8 per cent annually before the 1973-1974 Arab oil embargo, but declined to just over 4 per cent annual growth in the late 1970s. After the oil price spike resulting from the 1979 Iranian revolution, annual demand growth fell again to just over 2 per cent, and dropped a third time following the 1990 price spike that accompanied the UN embargo on Iraqi and Kuwaiti oil.

His reasoning focuses on supply side matter; quite a constrat to the widespread predictions of a supply crunch:

The recent supply problem that contributed to last year’s record rise in crude prices emerged from the collapse of the upstream oil sectors of Venezuela, Iraq and Nigeria, and the failure of Iran to increase output, Mr Morse contends.

When it realised in 2004 that “state failure” in those countries meant there was a previously unsuspected need to find more oil, Saudi Arabia, the world’s biggest oil exporter, “went on a rapid race to raise production, with results now coming to fruition”, he said.By the end of this year, the kingdom will have 12 million bpd of oil production capacity, about 35 per cent more than its present output.